Enviroscapes boosted its profitability by firing 70 percent of its clients.
When Todd Pugh founded Todd’s Enviroscapes in Louisville, Ohio, 16 years ago, he was consciously building on a family tradition. “I started in the dirt and my business was homegrown,” says Pugh, who first began mowing lawns for extra money when he was 14 years old. “My grandparents were successful dairy farmers, and I was raised on a hobby farm. My parents always enjoyed gardening, so I guess that is where I got my interest.”
In 2011, Enviroscapes had 125 employees, $8.5 million in revenue and three locations. Yet when Pugh embarked on his journey to become a successful business owner, he learned that his greatest asset could also be a liability. “I had to change my mindset from being a technician to a business owner,” he says. “I was a right-brained entrepreneur that said ‘OK, let’s do it,’ and we did it, but we weren’t focused.”
Four years ago, Pugh decided to focus on larger clients that brought in a minimum of $10,000 annually. The decision to eliminate small jobs wasn’t easy. As Pugh puts it, “We had to tell Mrs. Jones we couldn’t mow her lawn anymore.” Yet while the change eliminated more than 70 percent of Enviroscapes’ clients, it cost less than 20 percent of its revenue.
Pugh’s unwavering focus on his goals is now yielding impressive results, as shedding smaller clients has made Enviroscapes more effective, efficient – and profitable.
Continuous improvement. When Pugh first started Enviroscapes, he was too busy to analyze his operations. “We were focused on the landscape side and not the business side,” he says. “About 80 percent of our business was residential, and we were doing $20-a-week cuts. That’s a tough business model – there are a lot of sites to visit and clients to keep happy for not much money per account”
It was also challenging to manage employees while running a business. “I used to run the mowing crew, and then all of a sudden, we had five mowing crews and three landscape crews – I had to make sure they were all running efficiently,” Pugh says.
After seeing a presentation by former Groundmasters owner Mike Rorie at a lawn and landscape conference, Pugh developed a business plan. “Once you hear someone speak, and see they are actually doing what you want to, then there is this certain level of, ‘This is achievable.’” Then he reached out to consultants and took a no-holds-barred approach to paring his business down to essentials.
“You have to know when to flip the switch and take things to the next level,” Pugh says. “It’s about focusing on continuous improvement, and being good at what you do.”
From labor to operations. By focusing on operations, efficiency and innovation over several years, Pugh was able to grow Enviroscapes into a $5 million company.
During this time, Pugh also developed an approach toward pricing that he’s stuck with to this day. “We see ourselves as a value-added company,” he says. “We’re not the lowest priced, but we are competitive. Some people are cheap because that’s their business model – and if that works, that’s OK. But I was never satisfied with that.”
Pugh also began spending between $40,000 and $60,000 annually on consultants. “It’s a lot of money, but you’re bringing in someone that has knowledge of best practices from all over the industry,” he says. “A consultant can give you insight about your business in two days that could take you 10 years to learn on your own.”
Understand your limitations
Pugh spends between $40,000 and $60,000 in consultant fees every year. Although he says that the investment is worth it, he acknowledges that implementing their advice is not always easy.
“Things are always traveling 100 miles an hour, so you really have to be a mechanic and fix the bus while it’s moving,” he says.
Pugh hires consultants whose strengths balance out his weaknesses. Examples of areas that he’s focused on with his outside consultants include implementing financial controls within his company, tracking estimated versus actual hours, understanding how to train employees and communicating information to employees in the field.
Pugh hasn’t always taken his consultants’ advice. In fact, when he first began hiring outside experts, he had trouble finding time to follow their recommendations.
“After the third or fourth year of having lots of information, but not being able to execute the changes that were recommended, we pinpointed areas and really focused on them,” he says. “If you hire consultants, you really need to make a commitment.”
Pugh cautions business owners not to treat consultants as a panacea that will fix their every problem. “People hire consultants as if they’re the end all and be all, but they’re really just a source of information,” he says. “It’s up to the owner to implement change.”
Enviroscapes also continued to focus on the operations side of the business, including using technology and mechanization to make the company more efficient. In 1998, when a consultant advised him not to use labor for work that could easily be mechanized, Pugh partnered with a local fabrication shop and developed, and now sells, the Mulch Mule, a machine that moves bulk materials and saves labor.
Although Pugh says that the industry is slow to adapt to new technology, he sees the future lies in becoming leaner and more efficient. “There is more competition and the construction market is not growing right now, so companies have to adapt and become more efficient or they will become extinct.”
Being smart with new technology does not necessarily mean being the first to use it, Pugh cautions. “I always say that the cutting edge is the bloody edge – let someone else get bloody and we’ll come in behind them,” he says. “We’re quick but we’re not fast.”
The next level. By 2007, Pugh had grown Enviroscapes into a major player in Northeast Ohio, but he wasn’t satisfied. He had a great team of younger managers who wanted opportunities to continue to grow with Enviroscapes.“I had to either continue to grow the business or downsize,” he says. To take things to the next level, he needed to do something that seemed counterintuitive – he had to shed customers.
“We had so much work coming at us, and so during the winter of 2008 we started going through every customer that was in our database,” Pugh says. “We looked at profitability, routing, size of contract, PIB (pain in butt) factor, and how the client fit into our current model and asked ourselves, ‘Do they fit as an Enviroscapes client going forward?’”
Pugh realized that Enviroscapes could become more profitable by shedding clients that did not fit. His challenge, to put it mildly, was to politely get rid of more than 70 percent of his customers. “When we did our analysis, we learned that these customers that did not fit our model, mostly small customers, were less than 15 percent of our revenue,” he says. “We asked ourselves, ‘Can we afford to give up a couple hundred grand worth of work?’ We ultimately decided we could.”
Fortunately, Pugh had an employee that was ready to start a business of his own, and Pugh sold Enviroscapes’ smaller clients that no longer fit the business model.
Although Enviroscapes could have greater annual revenues if it accepted smaller customers, Pugh says the company’s focus has made it more profitable. By developing loyalty and deeper relationships with his clients, the relationship is a win-win.
“We began focusing on the bigger commercial sites – doing homeowners associations, colleges and universities and different kinds of public sector work,” says Pugh. “Our goal is to have fewer customers, but to do more work for them and offer the best customer service in the industry.”
It hasn’t always been easy to stay focused. “In the summer of 2009, we started to get slow, and one of our employees said, ‘Maybe we should go back to the types of jobs that we used to do,’” Pugh says. “We had to remind ourselves that the reason we sold off some of our client base was we could not take care of the clients the Enviroscapes way. We stayed focus and within a short period of time, we had plenty of the ‘right’ work.”
As Enviroscapes enters the next phase of its growth, Pugh has vowed to become even more focused. Next year, the company will again “clean the bottom of our accounts off,” he says. “Even in a bad economy, a bad account is a bad account.”
Pugh is proud that 70 percent of Enviroscapes’ work is maintenance, while only 30 percent is landscape installation. To ensure success moving forward, Pugh doesn’t want the company to have all of its eggs in one basket. “We’ve replaced unpredictable landscape work with predictable maintenance work,” he says.
“The future of the industry is in knowing your customer better than they know themselves,” Pugh adds. “If you do this, then you’ll have raving fans that want to help you. Don’t take your eye off the ball – and embrace building relationships.”
The author is a freelance writer based in Cleveland.
Pugh speaks at industry events about how his company narrowed its customer focus, rebranded and honed in on innovation. For more lessons from Pugh and a video interview, visit www.lawnandlandscape.com.